The problems arrived over a period of time from 1995 to 2008. The first and main problems that lead to the economic collapse was sub prime mortgages. Sub prime mortgage is a certain kind of loan granted to people with poor credit histories, who which wouldn’t usually be qualified for conventional mortgages (Investopedia). These sup prime mortgages would backfire on banks across the nation resulting in huge financial loses. According to USA Today, “Housing crisis deepens.
In December 2007, caused by the housing bubble, what is known as the Great Recession began (“The Great Recession”). Prior to this, people kept buying houses with high risk loans, because their mortgage-backed securities were technically making profits when the house values increased; however, when the house values started to decrease, those securities became worthless, thus people were not able to pay for the house—many people had their house confiscated. As a result of this wealth loss, consumer spending decreased sharply and many banks collapsed. The U.S. government tried to combat this issue, but many of the fiscal policies they had created were controversial because of their interference in the economy. One debate sparked on whether the government should spend its money to stimulate the economy by cutting taxes and creating jobs.
Now with fewer cars being sold G.M. and Chrysler were losing money and was desperate for help. With congress trying to find a solution, they proposed an auto bailout that would help the industry from dying. Although many argue the bailout gives an excuse to big car companies to fail, it was necessary because it helped save and create millions of jobs around the country. The auto bailout was an $80 billion bailout issued to G.M.
The Great Depression versus the Great Recession Since being founded, America became a capitalist society. Being a capitalist society obtains luxurious benefits and rather harsh consequences if gone bad. In a capitalist society people must buy products and spend money to keep the economy balanced, but once those people stop spending money, the economy goes off balance and the nation enters a recession. Once a recession drastically takes a downturn, the nation enters what is known as a depression. In 2008 America entered a recession and its consequences were severe enough for some people, such as President Barack Obama, to compare the recent crisis to the world’s darkest economic depression in history, the Great Depression.
26 Feb. 2014. 12 March 2014. http://krugman.blogs.nytimes.com/2014/02/26/a-general-theory-of-obamacare-fiction/?_php=true&_type=blogs&_r=0 Nather, David. "How Obamacare Affects Businesses Big and Small." ' Politico. 30 Sept. 2013.
Whether or not to keep or discard the Bush era tax cuts for the wealthy, give tax breaks to the lowest tax bracket, and even throwing out the entire current tax code and replacing it with a simpler version, tax code and tax law has been a very controversial topic for the past few years. As it stands, the current tax code has over seventy two thousand pages, compared to the four hundred pages it had in 1913. There are many different stakeholders in this debate including taxpayers, corporations, businesses, etc. Americans for Tax Reform (ATR) is an organization that was “founded in 1985 by Grover Norquist at the request of President Reagan”(.N.p.). Their goal is to create and advocate for a simple flat tax,“...on the belief that they will provide a strong stimulus to investment, employment, and output” (Stokey 1).
22 April 2013 Sanburn, Josh. “America’s Gun Economy, By The Numbers.” BusinessTime.com 18 December 2012. Web. 17 April 2014
Many people today would consider the 2008, United States financial crisis a simple “malfunction” or “mistake”, but it was nothing close to that. Contrary to what many believe, renowned economists and financial advisors regarded the financial crisis of 2007 and 2008 to be the most devastating crisis since the Great Depression of the 1930’s. To make matters worse, the decline in the economy expanded nationwide, resulting in the recession of 2007 to 2009 (Brue). David Einhorn, CEO of GreenHorn Capital, even goes as far as to say "What strikes me the most about the recent credit market crisis is how fast the world is trying to go back to business as usual. In my view, the crisis wasn't an accident.